- EUR/JPY meets with some supply on Thursday as JPY benefits from intervention fears.
- The BoJ rate hike uncertainty and the risk-on mood cap gains for the safe-haven JPY.
- Bets for less aggressive ECB rate cuts lend some support to the Euro and the cross.
The EUR/JPY cross struggles to capitalize on the previous day's goodish bounce from levels just below the 165.00 psychological mark and attracts fresh sellers on Thursday. Spot prices remain depressed through the first half of the European session and currently trade around the 165.70-165.65 area, though lack follow-through and remain confined in a familiar range held over the past week or so.
Wednesday's surge in the USD/JPY pair, triggered by Donald Trump's victory in the US election, prompted verbal intervention by Japanese authorities. This leads to some unwinding of the bearish positions around the Japanese Yen (JPY), which, in turn, is seen exerting downward pressure on the EUR/JPY cross. That said, the uncertainty over the Bank of Japan's (BoJ) rate-hike plan keeps a lid on any meaningful appreciating move for the JPY.
Investors seem convinced that Japan's political landscape could make it difficult for the BoJ to tighten its monetary policy further. Moreover, government data released this Thursday showed that Japan's inflation-adjusted wages fell for the second straight month in September, raising doubts about how soon the BoJ could raise rates again. This, along with the risk-on mood, caps the upside for the safe-haven JPY and offers support to the EUR/JPY cross.
The shared currency, on the other hand, draws support from bets for a less dovish European Central Bank (ECB). In fact, data released last week showed that inflation in the Eurozone rose to 2% in October. This, along with the better-than-expected GDP growth figures from the Eurozone's largest economies, suggests that the ECB will stick to a 25 basis points (bps) rate cut at the December meeting and helps limit the downside for the EUR/JPY cross.
Even from a technical perspective, the range-bound price action might still be categorized as a bullish consolidation phase on the back of the recent breakout above the very important 200-day Simple Moving Average (SMA). This, in turn, suggests that the path of least resistance for the EUR/JPY cross is to the upside. Hence, any subsequent decline might still be seen as a buying opportunity and is more likely to remain cushioned.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
GBP/USD holds recovery gains above 1.2900 ahead of BoE policy decision
GBP/USD builds its recovery momentum above 1.2900 in European trading on Thursday, moving away from its lowest level since mid-August. Traders adjust their positions ahead of the key BoE and Fed monetary policy announcements.
EUR/USD stays firm near 1.0750 amid US Dollar pullback
EUR/USD holds higher ground near 1.0750 in the European session on Thursday. The pair finds support from a broad US Dollar retreat, as traders unwind their Trunp win-inspired USD longs ahead of all-important Fed policy announcements.
Gold price faces challenges due to decline in safe-haven flows, awaits Fed rate decision
Gold price (XAU/USD) faced challenges as the dollar-denominated precious metals struggled due to a stronger US Dollar (USD) following the victory of former President Donald Trump in the US election.
BoE set for a second interest rate cut this year on Thursday
Market consensus points to further easing by the Bank of England's (BoE) upcoming interest rate decision on Thursday. The BoE has held rates steady at 5.00% in the previous gathering, but shifting investor sentiment now suggests a possible 25-basis-point cut this week.
Trump wins: Tax cuts come with a cost
Donald Trump’s victory will ensure a lower tax environment that should boost sentiment and spending in the near term. However, promised tariffs, immigration controls and higher borrowing costs will increasingly become headwinds through his presidential term.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.